Thursday, February 10, 2011

In the last post I (erroneously) showed pictures of a gate of a plant supposedly leased to China Agritech. This was the photo as supplied to me.

The sequence was that the American lawyer in Shanghai who I hired to do this project had a (junior) colleague in Anhui for New Year. Her family came from Anhui.

She visited the site. She got several photos of the plant by poking in the Window but did not supply a photo of the gate. I have included one - it is a metal-working plant as advertised. Alas she supplied me the photo of the gate from the website of the metal working company - not a photo she took herself.

So my Shanghai lawyer went to Anhui (standing room only on the train!) and took the photos himself today. He was - when seen taking photos - escorted quickly off site. However he found the mysterious China Agritech office.

Here is the building on site in which the China Agritech office resides.

There are more modern factories on site - but this is the office building.

China Agritech has its office on the second floor on the right hand side of this building. The office was deserted - it was after all the New Year holiday. It is not large - but this office is the only evidence that China Agritech had any facilities that we found.

There was no fertilizer plant on this site - even though this was clearly the low-rise site where - according to the SEC filing - China Agritech leased its Anhui Plant.

Finally the road to the site was not a rutted road as described in the Lucas McGee report - indeed it was a large site with more than one gate. Here is one gate - my contact was sent off site before he photographed the gate as photographed in the last post.

We have now clearly found China Agritech facilities - but they are NOT the plants as described in China Agritech filings. They are however at the addresses given for those plants in the Agritech filings.

It seems that they have indeed a larger plant but it's strange that it is under an adress they have never filed in their annual reports and statements. their picture clearly shows the same plant that L McGee photographed.This is all really strange and smells fishy but i have to admit their shareholder letter IS a strong response towards LM.Whether their numbers are correct and whether they really sell as much stuff as they claim at the price they claim is a different matter alltogether...

John has your short thesis changed at all in light of the factory size being larger than anticipated. You mention, "indeed it was a large site with more than one gate." I'm curious if you still believe the L.M. research to be on the up and up.

they sure put together a convincing letter...and I haven't watched the video but if they're producing 6-10,000 bags of fertilizer/day shouldn't they have pallets of the stuff in the "loading area". or have pallets not made their way to china? They should be kicking out at the very least 100 pallets a day.

Though I don't think production capacity = actual production. The company cites 200k tons of capacity. actual production could be 25k, who knows? I haven't done the revenue math.

I closed out some puts today at a loss that I bought because of your blog and the LM report.

Perhaps if you people are in the business of exposing scams you ought to be a little more careful before publishing this stuff. I realize I am the one with the ultimate decision with regards to buy or sell. But if you want people to continue to listen to you, you need to be less reactionary and more accurate in your reporting. I understand the jury is still out on this matter, but it certainly seems as you are backtracking big time, and the company certainly posted a believable response to all of this.

Investors, potential investors, short sellers, potential short sellers may wish to review a 5 year price chart of an American issuer called Converted Organics (COIN) as they had/have a similar business model. Things have not turned out as rosy as they were hyped up to be 3 years ago.

Could you please recommend what steps to take in order to hire either a lawyer or private eye in different chinese provinces to fulfill some simple, physical due dilligence? Actually, anyone who can be trusted, if that makes sense.

John, as for the small quantities sold, YONG has a similar concept. The company sells fulvic acid products that are for "farmers", but the quantity in each bottle is only 3.38 ounces (100 ml). There is very little research that suggests fulvic acid products are effective on plants and animals. The product that is sold to treat mastitis in cows is to be used over a long period of time, however we found a study that shows consumption can treat cows within 24hours, versus the few weeks that YONG suggests using its products for.

For the person who closed his put position at a loss - a refresher on investing 101:- the market can go up as well as down- the market can stay unreasonable for longer than you can stay solvent (apols. to Keynes)- if you don't like taking losses then put your money in govt bonds

In the markets there is always money at stake and so diverging opinion with elusive facts. If you want sure things then you're in the wrong place. This is a great blog but it's the product of one man's efforts whose main occupation managing money not writing for you! It cannot therefore be perfect. If you are putting capital at risk solely on the basis of what you read here then you have no one to blame but yourself. Do your own research. Take responsibility.

I said I fully accept responsibility for the loss, and I understand the risks.

All I am saying is that care be taken that Bronte Capital has all of their ducks in a row prior to publishing commentary. It's like yelling fire because someone lit up a cigarette. If you want to maintain credibility you have to take reasonable steps to be certain of what you write before publishing. I understand that nothing is infallible and that proving a negative is nearly impossible. Frankly I think CAGC very well might be a scam, but proving that is another story, and of course stock price is still another story at that.

Anyway it wasn't alot of money, more just the principle of the thing. I do enjoy the blog and sorry if I came across sour grapes, yesterday was a frustrating day for alot of reasons.

Anonymous: The whole nature of a blog is that it does not provide investment advice, because it's a free resource put together with limited information available at time of publication. If you want to pay Mr. Hempton to provide you with investment advice or complete vetted reports on short recommendations, I imagine the price is significantly higher. Furthermore, every possible short position I've seen mentioned on this blog has included numerous provisos that the author is not certain, that shorts are risky, that he has only a small position, etc. So you really have no decent argument here.

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The content contained in this blog represents the opinions of Mr. Hempton. Mr. Hempton may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Hempton's recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.